Jobs Report Allows Fed to Focus on Employment Instead of Inflation

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NEW YORK ( TheStreet) -- Federal Reserve Chairman Janet Yellen just breathed a sigh of relief.

Wall Street expected more jobs than the 209,000 added in July and it didn't anticipate the rising unemployment rate to 6.2%, but there's a few reasons this may have been good.

First, market chatter has been growing among investors that inflation could become an issue for the Fed, forcing the central bank to increase the federal funds rate earlier than expected.

Read More: The Curious Job of the Fed: Create Employment or Curb Inflation?

"The concern was that a really strong jobs report this morning was going to pull the Fed forward into the Spring of [next] year for the first interest rate move of the tightening cycle. This report probably didn't put that into play," Darrell Cronk, deputy chief investment officer at Wells Fargo Private Bank, said in an interview .

Members of the Fed, including St. Louis Fed President James Bullard, say they think the Fed should increase the fed funds rate by the end of the first quarter of 2015, but Yellen continues to reiterate they won't make that move for a "considerable" amount of time after the end of its economic stimulus program.

A large contributor to inflation in the economy is wage growth. The Bureau of Labor Statistics reported that wages increased 2% from a year ago, which lagged economists' consensus forecast for 2.2% growth.

This suggests that while the economy has strung together six straight months of adding more than 200,000 jobs, it hasn't brought with it a surge in wages.

This is good and bad.

It's bad because workers aren't receiving raises and they aren't getting bonuses. Many economists argue that in a normal recovery, strong wage growth increases annually by about 3% to 3.5%.

It's good because a sudden jolt in wages would surprise the Fed and its inflation rate forecast. The stock market likely wouldn't take it well if the Fed started to react early and push up rates right now, as market participants are bracing for that to occur in 2015.

However, there isn't much evidence to suggest wages will pop.

"There's still nothing like a tight labor market; inflation is also about 2%, so real wages are going nowhere and they haven't gone anywhere since the Great Recession started," Peter Cappelli, a professor at The Wharton School, said in an interview .

Read More: Why 'This Is Janet Yellen's FOMC Now'

This jobs report was in line with the trend, which is of a labor market that's growing at a solid clip with 2% wage growth and an unemployment rate nearing 6%. But the fact that it wasn't above the trend is allows investors another month to assume the Fed won't raise its rates sooner than it is hinting at the markets.